Electricity producer SSE warns Sunak against threat of windfall tax
SSE has denounced UK Chancellor Rishi Sunak’s plan to impose a windfall tax on power generators, warning that the ‘unnecessary’ threat has hurt investor confidence just as companies plan to invest billions of dollars. pounds in new energy projects in Britain.
“They [the government] used the word extraordinary profits [to justify the proposal]. Where are these extraordinary benefits? SSE chief executive Alistair Phillips-Davies told the Financial Times.
“I don’t know exactly where the manna is. Since we have very well-laid plans to invest heavily in [energy] grids, a lot of renewable energy generation, it’s very clear from the stock price reaction that they’re affecting investor confidence and that’s not helping us,” he added.
Sunak confirmed he also planned to target power generators when he announced a new one-off 25% levy on oil and gas producers in late May to part-fund a £15bn package to helping households with rising energy bills.
Describing power generators’ profits as ‘amazing’ due to high wholesale power prices, the Chancellor said he was considering ‘appropriate steps’ to ensure generators also help support consumers .
The plans erased billions of pounds from the value of power companies including SSE, Drax and Centrica, and even drew criticism from Labor, despite its MPs championing a windfall tax on oil producers and gas.
During a visit to Peterhead, north of Aberdeen, where SSE is spending more than £250million to strengthen the electricity grid to accommodate more renewable energy projects, Phillips-Davies argued that the sector of production was “much more complex” than oil and gas.
Utilities tend to sell their output well in advance and the sector covers a range of different technologies which are subject to different subsidy regimes.
“Looking at a price on a particular day for a megawatt [hour of electricity] or a gas therm, not everything trades at that price,” Phillips-Davies said.
SSE’s adjusted operating profit rose 15% to £1.5bn as of March 31, boosted by its gas-fired power plants and hydro plants which help meet supply when renewable technologies, such as wind power, do not produce. Profit at SSE Thermal, which includes its gasworks, jumped 91% last year to £306.3m
But Phillips-Davies argued that some assets that benefited from record gas and power prices last year had already suffered losses. He cited SSE’s gas storage facilities, which generated £30.7m in profit last year but brought in no money in the previous decade.
Ahead of Sunak’s speech last month, SSE pledged to invest more than £24bn this decade in clean energy infrastructure in Britain. It is developing vast new wind farms such as Dogger Bank off the northeast coast of England, which will be the world’s largest offshore grid when completed in 2026.
In Peterhead, where SSE has a gas-fired power station, the group hopes to develop a new facility fitted with carbon capture technology to help meet demand in the future, when the UK system will be even more dependent on energy. intermittent renewables but will have to emit little CO₂.
Asked if any of these projects could be threatened by a windfall tax, Phillips-Davies said SSE would still be able to build the projects in its £24billion pipeline, but warned ministers: “If someone decides to change the tax laws, we will have to restructure our projects so that they still make money.